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Defense Stock Roundup: Trade Spat Deals Blow, BA & LMT Win Deals, LLL Divests

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The global stock market continues to stagger as the ongoing trade dispute between the United States and China gains steam. The escalating trade dispute has already hit the U.S. economy, with punitive duties now in place for steel and aluminum and the White House threatening auto import tariffs.

With no drastic near-term improvement expected in the US-China trade relations, investors continue to remain skeptical about the equity market’s growth. This has been reflected in the aerospace and defense stocks’ performance over the past five trading sessions, which failed to rally in spite of witnessing a generous flow of funds from the Pentagon.

Evidently, major indices of the Aerospace-Defense space — the S&P 500 Aerospace & Defense (Industry) index and the Dow Jones U.S. Aerospace & Defense index — declined 5.3%, respectively, in the last five trading sessions.

Among last week’s highlights, defense majors — The Boeing Company (BA - Free Report) , Textron Inc. (TXT - Free Report) , Raytheon Company (RTN - Free Report) and Lockheed Martin Corp. (LMT - Free Report) — secured a few orders from the Department of Defense’s daily funding session. Moreover, L3 Technologies, Inc. (LLL - Free Report) completed its Vertex Aerospace divestiture.

(Read Defense Stock Roundup for June 29, 2018 here)

Recap of Last Week’s Key Stories

1. Bell-Boeing, a joint venture (JV) between Boeing and Bell Helicopter — a unit of Textron — secured a modification contract worth $4.2 billion in relation to V-22 aircraft. Per the terms of the agreement, the JV will convert the V-22 tiltrotor aircraft advance acquisition contract to a multi-year deal.

The contract was awarded by the Naval Air Systems Command, Patuxent River, MD. Per the deal, the JV will manufacture and deliver 39 CMV-22B aircraft for the U.S. Navy; 34 MV-22B aircraft for the U.S. Marine Corps; one CV-22B for the U. S. Air Force; and four MV-22B aircraft for the government of Japan.

The majority of the work will be executed in Fort Worth and Amarillo, TX; and Ridley Park, PA; while the rest will be carried out in various locations within continental and outside continental United States (read more: Bell-Boeing JV Wins $4.2B Deal to Manufacture V-22 Variants).

2. Raytheon’s Missile Systems business unit recently won a $315 million deal for the production of the Griffin Missiles. The contract was awarded by the U.S. Special Operations Command Contracting Office, Tampa, FL.

Per the deal, Raytheon will also provide related assistance for product improvement, operations and sustainment for the Griffin Missiles. Work related to the deal will be performed at the contractor facilities in Tucson, AZ (read more: Raytheon Acquires $315M Deal for Griffin Missile Production).

3. Lockheed Martin’s Missiles and Fire Control business unit recently won a $288.3 million modification contract to provide sensor systems along with other technical services for the Apache helicopter to United Arab Emirates. The contract was awarded by the U.S. Army Contracting Command, Rock Island Arsenal, IL.

Per the agreement, Lockheed Martin will provide the Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor (M-TADS/PNVS), subcomponents and technical services for the Apache attack helicopter. The contract was secured under the domestic and foreign military sales program.

Work related to the deal will be performed in Orlando, FL and is expected to be completed by Dec 31, 2021 (read more: Lockheed Martin Acquires $288M Apache Attack Helicopter Deal).

4. L3 Technologies made an announcement regarding completion of its Vertex Aerospace business’ sale to a New York-based private equity firm named American Industrial Partners, for $540 million. The transaction, originally approved in October 2017, was finally closed on Jun 29, 2018.

The terms of the agreement also included divestiture of the company’s Crestview Aerospace and TCS business units (read more: L3 Technologies Closes $540M Vertex Aerospace Divestiture).

Performance

Over the last five trading sessions, the defense biggies put up a strong show. General Dynamics gained the most with a 2% gain in its share price, followed by Lockheed Martin and L3 Technologies.

Over the last six months, the industry has put up a stellar performance, except Lockheed Martin. Keeping up with its usual trend, Boeing once again gained the most with its shares increasing 7.8%. This time shares of L3 Technologies also increased the maximum. 

The following table shows the price movement of the major defense players over the past five trading days and during the last six months.

 

CompanyLast WeekLast 6 Months
LMT1.61%-8.34%
BA0.95%7.80%
GD2.10%5.87%
RTN1.27%3.50%
NOC0.77%4.89%
COL0.55%4.30%
TXT0.84%5.24%
LLL1.61%7.79%



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